(March 3 – 10:00 ET) – The bank economists are forecasting more interest rate hikes on the horizon. Last week’s stock market gains came on a string of favourable economic releases and Monday’s market-friendly federal budget, says Nesbitt.
Nesbitt says “the data suggest that the U.S. Federal Reserve, while remaining in tightening mode, has no reason to press the panic button.” It is calling for a 25 basis point hike at the March 21st Fed meeting. RBC DS Global Markets is forecasting 25 bps at each of the next two meetings, with risk of even heavier moves.
U.S. Federal Reserve Board chairman Alan Greenspan is speaking about the new economy at Boston College on Monday. That will have Fed watchers on the edge of their seats. RBC DS is anticipating some hawkish comments from the speech. CIBC economists are not worried about the Fed. They’re expected a good report on non-farm productivity from the U.S. tomorrow, gains that are good for the economy.
The data schedule is so slight in the U.S. this week, that CIBC is resorting to political punditry, making the Super Tuesday primaries its focus of this week’s economic synopsis. CIBC is predicting that Al Gore has the democratic nomination sewn up, and that George W. Bush will be called on to represent the GOP. CIBC believes that the bond market favours Gore, and that Bush’s tax-cutting plans will consume the entire budgetary surplus in the U.S.
In Canada, there is more data on the schedule. Our labour market report is due out on Friday. It’s expected to mimic the U.S. with a short-lived respite for inflation watchers.
Yet the week won’t be a dead loss CIBC says. It believes Tuesday’s capacity utilization number will confirm that the Bank of Canada will follow any rate hikes by the Fed, showing that capacity is 86% utilized. Bank Governor Gordon Thiessen is making a rare public appearance on Thursday to address the Canadian Society of New York.
-IE Staff